Dive Brief:
- Japan-based Nippon Steel is set to acquire U.S. Steel in a deal valued at $14.9 billion, the companies said Monday in a joint press release.
- The acquisition will allow Nippon Steel to expand its production in the U.S., adding to its manufacturing bases in Japan, Thailand, India and other countries.
- The transaction will increase Nippon Steel’s total crude steel capacity to 86 million tons a year, pushing the steelmaker closer to its goal of producing 100 million tons of steel annually. It will also make the combined entity one of the largest steel producers in the world.
Dive Insight:
Nippon Steel won the deal in an auction that included major steel competitors Cleveland-Cliffs, Esmark and ArcellorMittal.
Cleveland-Cliffs also made a bid to buy U.S. Steel in August for $35 per share. The company rejected Cleveland-Cliffs’ offer for being “unreasonable,” and failing to reflect the full value of U.S. Steel. The proposed acquisition did, however, have the endorsement of the United Steelworkers union, according to Cleveland-Cliffs.
Nippon Steel’s proposal is a major step up in value from Cleveland-Cliffs’ offer. The final sale, which has an equity value of $14.1 billion, is an all-cash deal at $55.00 per share, representing a 40% premium to the company’s share price when the market closed on Friday.
U.S. Steel, which produces 22.4 million net tons of steel annually, will retain its company name and headquarters in Pittsburgh, Pennsylvania. Nippon Steel also noted in the press release that it will honor all of U.S. Steel’s existing union contracts with the United Steelworkers.
The deal, however, has been slammed by the union, which called it “greedy” and “shortsighted.”
"We remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” David McCall, international president of the United Steelworkers, said in a statement Monday.
Last month, U.S. Steel laid off 1,076 workers when it stopped production at a plant in Granite City, Illinois. The idling of the plant came amid the then-ongoing United Auto Workers strike, with automotive making up approximately 30% of U.S. Steel’s flat-rolled segment.
The sale to Nippon Steel is expected to close in Q2 or Q3 next year and is still subject to US shareholder approval and other regulatory approvals.
